The influence of capital openness on income inequality in middle-income countries in the period of 2012-2021, a panel data approach

The influence of capital openness on income inequality in middle-income countries in the period of 2012-2021, a panel data approach

Economics

Alice Ailin Li

2024

In this paper, we investigate the relationship between capital openness and income in- equality for selected 25 middle-income countries. Capital openness is defined as the extent to which a country allows the flow of financial capital across borders. We selected control variables regarding education levels and trade openness and employed the Newey-West estimation method. The results confirm the theory that capital openness has a posi- tive effect on inequality, the higher the financial globalization of a nation, the higher the inequality. This suggests that when devising policy centered on capital openness, it is important not to overlook its effect on inequality.